WHAT EVERY FAMILY LAW LAWYER SHOULD KNOW ABOUT ESTATE LAW * M.E. Hoffstein** ehoffstein@tor.fasken.com Telephone no

Transcription

1 WHAT EVERY FAMILY LAW LAWYER SHOULD KNOW ABOUT ESTATE LAW * M.E. Hoffstein** ehoffstein@tor.fasken.com Telephone no This paper will highlight the ways in which the Succession Law Reform Act 1 (the SLRA ) and the Family Law Act 2 (the FLA ) affect the administration of an estate. 3 A. SUCCESSION LAW REFORM ACT 1. BACKGROUND Part V of the SLRA governs claims for support. Section 58(1) provides as follows: Where a deceased, whether testate or intestate, has not made adequate provision for the proper support of his dependants or any of them, the court, on application, may order that such provision as it considers adequate be made out of the estate of the deceased for the proper support of the dependant or any of them. For the purposes of this section, the term dependant is defined to mean: (a) (b) (c) (d) The spouse or same-sex partner of the deceased; A parent of the deceased; A child of the deceased; or A brother or sister of the deceased to whom the deceased was providing support or was under a legal obligation to provide support immediately before his or her death. It should be noted that in order to qualify as a dependant a claimant must satisfy two tests: **Partner, Fasken Martineau DuMoulin LLP. The author acknowledges the assistance of Laura West in the preparation of these materials. 1 R.S.O c. S R.S.O c. F.3. 3 There are a number of excellent articles and case summaries concerning the topics discussed in this paper. See for example Hilary Laidlaw, Counting on their Support: Dependant s Relief for Spouses and Children OBA (June 2004); J. Jasmine Sweatman, The Equalization Claim - Death of a Spouse OBA (June 2004); as well as articles by Barry Corbin, including his contribution to the 2005 LSUC Bar Admission Course Materials, The Impact of the Family Law Act on Estate Administration.

2 - 2 - (a) (b) he or she must stand in a certain relationship to the deceased; and the deceased must have been either providing support or under a legal occupation to do so immediately before death. Relationship Criteria With regard to the relationships of a claimant to the deceased it should be noted that the terms, spouse, child and parent all have extended meanings. A spouse includes a common-law spouse 4 and as well a person whose marriage to the deceased was terminated or declared a nullity. Thus, a deceased person could have more than one spouse for purposes of the dependant relief provision of the SLRA. As well, as of March 1, 2001, the definition of spouse was amended to include a same-sex partner. 5 The term parent includes a grandparent and a person who also demonstrated a settled intention to treat the deceased as a child of his or her parents. The term child includes a grandchild and a person to whom the deceased has demonstrated a settled intention to treat as a child of his or her family except under arrangements where the child is placed for valuable consideration in a foster home by a person having custody. In Rechellew v. Public Trustee 6, a dependant child was also determined to include a child of any age where the deceased was actually providing support before death or was under a legal obligation to do so even if there was no actual dependency. However, see subsection 62(i)(q) of the SLRA, where it is directed that a court must take into consideration whether a child who has attained the age of sixteen years or more has withdrawn from parental control. Support Criteria The criterion that there has to have been a pre-existing support obligation is comprised of two components, namely, that the deceased was either actually providing support at the date of death or alternately was under a legal obligation to provide support at the time of death. Thus for example, even if a spouse was not receiving support at the date of death of a deceased, it might be argued that the deceased was under a legal obligation to provide support immediately before death 2. ISSUES 4 See the decision of M. v. H. [1999] 2 S.C.R. 3 and MVH Act, S.O c.6. 5 The term same-sex partner is defined to mean either of 2 persons of the same sex who have co-habitated (a) continuously for a period of not less than 3 years or (b) in a relationship in some permanence if they are the natural or adoptive parents of a child. 6 (1983) 45 O.R. (2d) 189 (Ont. Surr. CT.)

3 - 3 - (a) What is adequate support? In determining whether a deceased made adequate provision for his or her dependants, a court must first evaluate what was given under the will or on intestacy and then must determine what is adequate support. Here again, the consideration of what constitutes adequate support is based on the facts and circumstances of each case and not simply on what is adequate at the present time but also what would be adequate in the future. The court also considers not simply the necessities of life but also the lifestyle of the parties. 7 (b) When must an action be commenced? Subsection 61(1) of the SLRA provides that an action must be commenced within 6 months after the Certificate of Appointment of Estate Trustee has been issued. The court has the discretion to extend the limitation period but in such a case the dependant s claim only extends to the undistributed part of the estate. The case law discloses that the court s decision as to whether it is appropriate to extend the time for making an application is very fact driven. 8 A common probate planning technique is to have two wills - one to deal with assets that require probate to deal with them (the probatable will) and another to deal with assets that do not require probate (the non probatable will). The intention is that the latter will is not probated thus saving probate tax on the value of assets passing under that will. Assets commonly dealt with under non-probatable wills include private company shares and often these comprise the most valuable assets of the deceased. Presumably since the limitation period for an SLRA claim is six months after the issuance of the Certificate of Appointment of Estate Trustee and because no Certificate of Appointment will be sought in respect of assets dealt with by the non probatable will, there is no limitation period for SLRA claims in respect of this part of a deceased s estate (c) Effect of commencement of application on distribution of estate. Subsection 67(1) provides for an automatic stay of the distribution of the estate once the application is commenced and the estate trustee is served with notice. Subsection 67(2) provides an exception for reasonable advances for support of dependants who are beneficiaries. If an estate trustee violates the provision of subsection 67(1), he/she is personally liable for the amount so distributed. (d) Determination of amount of support: Subsection 62(1) sets out the criteria a court must consider in determining the amount and duration of support. The criteria are set out in schedule A to this paper. 7 See LaPierre v. LaPierre Estate (2002) O.J. No 1275 (Ont. SCJ); Re Davis v. Davis (1979) 6 ETR 127 (Ont. Surr. Ct.); Re Detinger (1981) 128 DLR (3d) 63 (Ont. Surr. Ct); Caluori v. Caluori Estate (1992) O.J. No (Ont. Gen. Div.). 8 See Daye v. Holmes Estate (1987) 25 E.T.R. 160 Ont. HCJ; McGahan v. McIntyre Estate (2001) O.J. No 4895; Gow v. Gow Estate (1994) O.J. No

4 - 4 - The court is not required to consider every criterion that is listed, but instead must consider only those that are relevant to the facts of each particular case. The court may also take into account any other evidence it considers appropriate with respect to the reasons the deceased may have had for making the dispositions in his/her will or for not making adequate provision for the dependant. 9 Thus, it may be prudent for the lawyer preparing a will for a client who is making or not making provisions for a person who may qualify as a dependant, to suggest that the client articulate the reasons for her/his decision in a written statement. It is interesting to note that the court can take into consideration ethical factors such as past conduct that is unconscionable. One of the factors that the court must consider in the case of a dependant who is a spouse is any agreement between the deceased and the dependant. Thus, a court must consider agreements such as cohabitation agreements, separation agreements and minutes of settlement of a divorce. 10 However the court is also given the discretion to enforce or not enforce such agreements. Subsection 62(4) provides that an order under this section may be made despite any agreement or waiver to the contrary. The cases are fact driven but it would appear that the courts do give weight to such agreements and appear reluctant to allow dependant relief claims to be used as a means to alter such agreements absent compelling reasons. Another criteria that the court is directed to consider (again in the context of a dependant who is a spouse) is the conduct of the applicant spouse toward the deceased that is so unconscionable as to constitute an obvious and gross repudiation of the relationship. 11 With respect to child support applications, the courts also look to agreements between the spouses, as in many cases such agreements contain not only provisions for spousal support but also deal with child support obligations between the spouses. As in the case of applications for spousal support, the courts seem to give considerable weight to the fact that such agreements exist, as well as the content of their terms, in determining not only whether a dependant who is a child of the deceased has standing to make an application for support but also in respect of the entitlement to support. (e) Making an Order for Support In making an order for support of a dependant under the SLRA, the court has broad discretion and may impose such conditions and restrictions as it considers appropriate. 12 Subsection 63(2) provides for various types of awards that a court can make, but the court is not limited by the types of awards listed. These awards include periodic payments, lump sum payments, payments for life or a term of years, transfers of property outright or in trust, and payments to third parties for the benefit of the dependant. In the context of an estate, sometimes a lump sum payment is 9 See subsection 62(3) of the SLRA. 10 See Philis-Renwick v. Renwick Estate (2003) 229 DLR (4 th ) 158 (Ont. SCJ); Misumi v. Misumi Estate (2003) CarswellOnt 957 (SCJ); and Friedel v. Friedt Estate (2002) CarswellOnt 2777 (SCJ). 11 See Robins v. Robins Estate (2003) CarswellOnt 1272 (Ont. SCJ); and LaPierre v. LaPierre Estate (2002) 44 ETR (2d) 228 (Ont. SCJ). 12 Subsection 63(1) of the SLRA.

5 - 5 - preferred so as not to hold up the administration and wind up of an estate, notwithstanding that historically periodic payments orders most closely resemble traditional support. Another factor that the courts can take into account is other benefits received from the deceased. In the case of DeWinter, 13 for example, the applicant had brought an FLA equalization claim as well as an SLRA dependant relief claim. An award was made under both statutes but the court took into account the income that the equalization payment would generate. 14 The recent introduction of the Child Support Guidelines raises the question of their applicability to dependant relief claims. The relatively few cases that address the issue are inconsistent. However, despite these inconsistencies, there appears to be a clear position that it is not appropriate to apply the Guidelines in the context of a dependant relief application brought on behalf of a child. The reasons are twofold. Firstly it has been acknowledged that the Guidelines do not fit well with a claim against the estate because they are premised on a living support payor who has or could and should have annual income. 15 In addition, there is no continuing income stream on which to calculate what would constitute proper payment. As noted by Professor McLeod: 16 [T]he difficulties with such an analysis in the case were that the father was dead and his estate was composed of capital that would generate minimal income to pay future child support and the mother had not taken any steps to increase support until shortly before the husband s death (the judge did not explain) how he deemed the father alive and attributed income to him. In the end, it appears that Perkins J. awarded support pursuant to the dependants relief provisions of the Succession Law Reform Act under the guise of making a child support order under the Guidelines. Because the deceased s estate had insufficient income to pay support according to the Guidelines Tables, Perkins J was forced to order support based on the estate s capital, an outcome that is inconsistent with the Guidelines approach. 17 Another recent development is the consideration by the courts of the moral obligations of the deceased when determining an order for support, whether spousal support or child support. The consideration of moral obligations in the context of dependant relief is not new in Canadian jurisprudence. Over the years the courts in British Columbia have evidenced a willingness to chip away at the concept of testamentary freedom in favour of ensuring that adequate, just and 13 (2001 ) 41 E.T.R. (2d) 190 Ont. SCJ. 14 Ibid. and see also Re Goodfriend 2003 O.J. No SCJ. 15 Hillock v. Hillock Estate 2001 CarswellOnt 3458 SCJ para. 14 and see annotation following the case by James G. McLeod. 16 Ibid. 17 See comments supporting this view in Giguere v. Giguere 2003 CarswellOnt 5006 (SCJ).

6 - 6 - equitable provision be made for dependants. The courts in Ontario have not been as forthcoming, due in large part to the fact that the wording of the Wills Variation Act 18 in British Columbia is different from that of the dependant relief provisions of the SLRA. However, the recent case of Cummings v. Cummings 19 may be an indication of a shift in the weight to be given to the moral obligations of the deceased in Ontario. In the Cummings case, the adult children of the first marriage of the deceased brought an application for support. The son, aged 24, suffered from a severe neuromuscular disease, and his prospects for long term employment were dim. His health care needs would become more costly as the years went on. The daughter, age 18 at the time of her father s death, was in school and intended to pursue a university education. The will provided for a fund of $125,000 to be set aside for the children with the balance of the estate to go to the deceased s second wife. The value of the estate was deemed to be $650,000 for purposes of the dependant relief application. At trial, Cullity J. agreed that the deceased had not made adequate provision for his dependants. He also acknowledged that even the full value of the estate would not be sufficient to satisfy all of the current and future needs of the son. He set the level of support at a lump sum amount of $250,000, payable by way of a lump sum to the mother of the children in trust, to provide a maximum of $10,000 to the daughter to allow her to complete her Master s degree and the balance to be held in trust for the care and welfare of the son. In coming to his decision, Cullity J. considered the needs and means of the children, the size of the testamentary and notional estates, the legal and moral claims of the children, as well as those of the first and second wives, notwithstanding that the second spouse did not appear to be in need of support and had not in fact made a claim. The appeal of the children for a 2/3 / 1/3 distribution was dismissed. At trial, Cullity J. articulated the law of Ontario as follows: I believe that apart from any residual value that is to be attributed to freedom of testamentary disposition and the direction in section 62(1)(k) to consider the existence of a legal obligation to support another person, moral considerations continue to have a part to play in the analysis although, if due consideration is given to the differences in the wording of the legislation of this province and that of British Columbia, they may not be given the same significance as in the courts of the latter. The Court of Appeal agreed with Cullity J. that this represents the law in Ontario, but held that moral considerations are as important in Ontario as in British Columbia, and that the disparities between the British Columbia and Ontario statutes are not sufficiently telling to preclude the application of Taratyn in this province. 18 RSBC 1996 c CarswellOnt 99 (CA) affd DLR 4 th 732 (Ont.SCJ).

7 - 7 - In the earlier Taratyn case referred to above, 20 the Supreme Court of Canada determined that a deceased s moral duty toward his or her dependants is a relevant consideration on an application for dependant relief and that judges are not restricted to a needs based economic analysis when determining what support is proper. While the full impact of the Cummings case is not yet known and the question of whether it will be applied narrowly or in a more expansive manner is still to be determined, a number of decisions have considered the case which provide some indication of future developments in this area. In the case of Simpson v. Leardi 21, the plaintiff asserted that because the estate had increased significantly due to a sale of property (the sale had also increased the plaintiff s assets, though to a lesser degree than the estate) that the plaintiff was entitled to an increased support order. The plaintiff argued that Cummings expanded the scope of a judge s review from a needs based analysis to a review of the moral duty of the deceased. The court rejected the argument of the plaintiff for a continuation of the support order and held that the Cummings decision applied only to situations where the court was weighing the competing claims of a number of dependants against an estate that contained insufficient assets to satisfy those claims. The decision of Juffs v. Investors Group Financial Services Inc. 22 relied on Cummings and considered moral obligations in calculating the amount of support to be awarded under the dependant relief provisions of the SLRA. The applicant was the child of the deceased, who was seeking to claim arrears in child support payments that were owed by the deceased to the applicant s father. The court determined that since the arrears were legally owed to the applicant s father, the entire amount was not recoverable. However, upon considering the moral obligations of the deceased, the court awarded half of the full amount of arrears to the applicant. In Madore-Ogilvie (Litigation guardian of) v. Ogilvie Estate 23 there were competing claims against the deceased s estate by three of the deceased s children, each a child of different mothers. The court used the Cummings decision as the established approach to examine the circumstances of an application for dependant s relief. 24 In accordance with this approach, the court considered the obligation of the deceased to act as a judicious person when providing for his dependants, and held that the estate should be divided into three equal shares in favour of the three applicants. Another recent case to apply the Cummings analysis was Perilli v. Foley. 25 In this case, the deceased provided in his Will for his common-law spouse to receive a monthly payment of $500, 20 [1994] 2 S.C.R [2005] O.J. No [2005] O.J. No [2005] O.J. No Ibid. at para [2006] O.J. No. 465.

8 - 8 - up to a total amount of $30,000. When examining the common-law spouse s claim for dependant relief, the court cited the Cummings analysis as authority: It is clear from that long list [the factors set out in subsection 62(1) of the SLRA] that the court must do more than conduct a simple needs-based analysis to determine the issue of proper support. The need of the dependant is only one factor to be considered. Moreover, the Ontario Court of Appeal has held that the court should use the judicious father and husband test in determining the appropriate disposition, as opposed to a needs-based analysis. See the case of Cummings at paragraph 40. In addition to the consideration of the moral duty owed by the deceased to his or her dependants, the Court in Perilli also reiterated the Cummings principle that the court must also consider any legal or moral obligations of the deceased to his or her non-party/independent spouses and children. In Perilli, the court found that the deceased had not satisfied his moral duty to adequately support his common-law spouse, and awarded the applicant a lump sum based on her monthly needs for the duration of her life. In the case of Reid v. Reid 26, the deceased had left her estate to her two children equally. The applicants were one of the deceased s children (a daughter) and her two children. The daughter and one of her children were mentally challenged and the other child was a minor. The main asset of the estate was a house in which the daughter and her two children were living. The court held that by providing shelter, the deceased had been providing support to the applicants prior to her death, as support provided by the testator need not be direct financial support. The court then concluded that there was a subtle intention by the testator to provide support for all three applicants. The court therefore readjusted the distribution of the estate to provide for an equal division four ways among the son, the daughter, and the daughter s two children. It would therefore appear that while the analysis in this case follows the Ontario statute in focusing on the subtle intention of the testator, the comment that the support need not be direct financial support demonstrates that the Taratyn and Cummings approach is beginning to filter into Ontario. Although the dictates of brevity do not allow a thorough analysis of the differences between the British Columbia and Ontario legislation in this area, the introduction of the Cummings and Taratyn approach into Ontario jurisprudence raises a number of interesting questions. For example, are there any circumstances in which a testator s moral obligation, if existent, would cease? For example, would a testator have a moral obligation towards an abusive adult child? Would the same testator have a moral obligation towards an adult child who not only refuses to have a relationship with the testator but also refuses to allow the testator to have a relationship with his or her grandchildren? Further, how exactly will the court interpret the behaviour of a judicious testator? Will a testator who explicitly wishes to leave her estate in a non-judicious manner have restraints placed on her testamentary freedom by the existence of ongoing moral obligations to adult children? Will the perceived existence of such moral obligations prevent a 26 [1005] O.J. No

9 - 9 - testator from exercising his or her freedom to distribute his or her assets in a capricious or flighty manner? (f) What assets are available for a support order? Subsection 58(1) of the SLRA provides that the source of the payment of a support order is out of the estate of the deceased. Section 72 has the effect of clawing back the capital value of certain assets which would not typically be considered part of the estate, but which can be deemed to be part of the estate not only for purposes of determining the value of the estate but also for purposes of being available to be charged for payment of a support order. The list of assets in section 72 includes the following (i) (ii) (iii) (iv) (v) (vi) Gifts mortis causa; Money on deposit in the name of the deceased in trust for another; Money in a joint account which passes by survivorship; Any disposition of property made by the deceased whereby property is held at death by the deceased and another; The proceeds of a life insurance policy on the life of the deceased and owned by the deceased and any amount payable under a group life insurance policy; Any amount payable under a beneficiary designation on an RRSP or similar plan; Subsection 72(3) provides that the burden of proving that such assets belonged to the deceased rests with the person claiming to be a dependant. It is interesting to note that because generally such assets are not considered to be part of the estate of the deceased, they are not available to satisfy the claims of the deceased s creditors. Section 72 of the SLRA therefore creates a right for dependants that is above that of other creditors of the deceased and surprisingly even above those who may have been designated to take ownership of the property on the death of the deceased. B. THE FAMILY LAW ACT: ELECTIONS AND THEIR EFFECT ON THE ADMINISTRATION OF AN ESTATE - 1. BACKGROUND The second statute that impacts on the administration of an estate is the Family Law Act and the possibility of claims for equalization and support obligations. It is assumed for the purposes of this paper that the terms net family property and property are familiar to this audience. In addition, valuation and tax issues will not be dealt with in the material that follows. Part I of the FLA, at section 6, provides that when a spouse dies leaving a will, the surviving spouse must elect to either take under the will or to receive the entitlement under section 5 of the

10 FLA. If the spouse dies without a will, then the election is between the entitlement under the intestacy rules (Part II of the SLRA) and the entitlement under the FLA. It should also be noted that the term spouse refers to two persons who are married to each other or who have entered into marriage that is voidable or void in good faith. The definition of spouse does not contemplate a common law relationship. Subsection 5(2) of the FLA provides that when a spouse dies, if the net family property ("NFP") of the deceased spouse exceeds the NFP of the surviving spouse, the surviving spouse is entitled to one half of the difference between them. It should be noted that the right to the equalizing payment only arises in the death situation if the surviving spouse s NFP is less than that of the deceased spouse. The valuation date for the purposes of determining equalization on death is the date before the date on which one of the spouses dies leaving the other spouse surviving, assuming that none of the other valuation dates has occurred (such as the date of the separation of the spouses or the date that both spouses die simultaneously). An application to determine entitlement to an equalization payment that was commenced before the death of the applicant spouse may be continued by or against the deceased spouse s estate. Subsection 7(2) of the FLA provides that entitlement under subsections 5(1), 5(2) and 5(3) is personal as between the spouses, but an application based on subsections 5(1) or 5(3) commenced before a spouse s death may be continued by or against the deceased spouse s estate, and an application based on subsection 5(2) may be made by or against a deceased spouse s estate The question of whether to elect or not is not a straightforward one. In addition to having to determine NFP, consideration has to be given to the fact that in addition to any property received pursuant to an election, a surviving spouse is entitled to (i) (ii) (iii) any property outside the estate which may fall to him or her; any gifts made pursuant to the terms of the will in addition to any entitlement under section 5 of the FLA, but only if the will expressly so provides. (see subsection 6(5) of the FLA) If the will does not so provide, then the spouse must effectively choose to take the benefits under the will or the entitlement under section 5 of the FLA. The FLA provides is that if the surviving spouse elects to take his or her equalization payment, the will is to be read as if that surviving spouse had predeceased the testator. If the provisions of the will leave a life interest in the estate of the deceased spouse to the surviving spouse, it is often difficult to determine whether it is better to elect to take the FLA entitlement or be a beneficiary under the will. insurance proceeds of a policy of life insurance on the life of the deceased spouse and owned by the deceased spouse or which was taken out on the lives of a group of which he or she was a member, or a lump sum payment under a pension or similar plan on the death of the deceased spouse so long as a written designation by the deceased spouse provides that this is in addition to the entitlement under section 5. If that written designation is

11 not made, the payment must be credited against the surviving spouse s entitlement under section 5 ( See subsection 6(6) of the FLA) The election must be filed within 6 months of the date of death of the deceased spouse unless an extension of time is granted.. The election must be in prescribed form and filed with the office of the Estate Registrar for Ontario. Failure to file the election will result in the spouse being deemed have elected to take under the will, the SLRA or both, unless the court orders otherwise. It should be noted that subsection 2(8) of the FLA provides that a court may extend a time prescribed by the Act (i.e. the six month election limitation period) if it is satisfied that: (i) (ii) there are apparent grounds for relief; relief is unavailable because of delay that has been incurred in good faith; and 2. ISSUES (iii) no person will suffer substantial prejudice by reason of the delay. 27 (a) Can a person acting under a power of attorney file an election? Questions have arisen as to whether a person acting under a power of attorney of a surviving spouse has the authority to file an election on behalf of the surviving spouse. In the case of Anderson v. Anderson Estate 28 the plaintiff surviving spouse executed a power of attorney in favour of her daughter and son-in-law after her husband s death. She became incompetent after she signed the power of attorney but within the 6 month limitation period. The attorneys elected, within the limitation period, to receive the plaintiff s entitlement under the FLA rather than the benefits under the will. The court upheld the ability of the attorneys to make the election for the following reasons: (i) (ii) the legislature could not possibly have intended that an incompetent surviving spouse should be deprived of his or her right to elect simply because he or she was under a disability; it is not the right to elect that is personal but rather the right to entitlement that is personal; and 27 See Varga v. Varga Estate (1987) 26 E.T.R. 172 (Ont H.C.), where a widow made a document purporting to elect for one-half of the estate under the FLA rather than the provisions of the Will of her deceased husband. The widow s lawyer mailed the document to the lawyer for the estate with instructions to file it with the court. It was mailed to the court clerk but was then returned as no affidavit of execution was included. The document was later mailed to court and retained by the office but was never recorded in the usual way. The court eventually held that election not properly filed and recorded and thus no election made. 28 (1990) 74 OR (2d) 58 (Ont HCJ).

12 (iii) an election by an attorney acting under a valid power of attorney upon the mental incompetency of the donor is indistinguishable from the case of an election by the Public Trustee (now the Public Guardian and Trustee) on behalf of a mentally incompetent person. 29 In the case of Rosenberg v. Romberg, 30 the issue was whether a personal representative of a surviving spouse who dies within the 6 month limitation period without having elected is entitled to file the election and make application for the equalization payment. The court held that the right to make an election is personal between the spouses and could not be exercised by the personal representative. Thus, the court held that the surviving spouse s right to elect died with that spouse. The court in the Anderson case distinguished the Rosenberg case on the grounds that in the Anderson case the surviving spouse was still alive and therefore her right to elect was also still alive. The fat that she was incompetent to make the election personally did not diminish that right. Another issue is whether it is possible to incorporate a provision in a power of attorney to restrict the attorney from the obligation to bring a FLA claim in the above situations. Consistent with the fiduciary duty of an attorney acting under a power of attorney, there is a duty to consider whether the FLA claim is in the best interests of the donor. An individual who is appointed as an attorney may be in a conflict of interest regarding the estate of the donor. For example, he or she may be acting as an attorney for a surviving spouse and also be a named beneficiary under the will of the deceased. So, the question arises. Can the power of attorney restrict the donee of the power from making such an election? The Substitute Decisions Act 31 (the SDA ) contemplates that the scope of a power of attorney can be limited or general and that conditions and restrictions can be provided for in a power of attorney. 32 Thus it appears that there is no provision in the SDA preventing such a restriction. The flip side of the issue is to consider whether, if discretion is given to the attorney to either elect or not elect under the FLA, it may be prudent to also provide that the donor recognizes the conflict the attorney may be under and that there is still authorization for him or her to make the decisions he or she is empowered to make as donee of the power of attorney See Cronkwright Estate v. Maltby 1988 O.J. No. 686 (Ont CH), in which it was held that the Public Trustee acting as committee of a spouse under the Mental Health Act had authority to make an election. See also Ward v. National Trust Company (1990) (Ont. Gen Div.) in which it was held that a committee appointed under the Mental Incompetency Act had the authority to make an election. 30 (1989 ) 70 OR (2d) 146 (Ont CA). 31 S.O. 1992, c Ibid. at s. 7(6). 33 See Grunnerud v Grunnerud Estate (2002) 2 SCR 417, where the Supreme Court of Canada determined that the Public Trustee of Saskatchewan could not bring an equalization claim on behalf of an incompetent surviving spouse who was living in a publicly funded institution and owned only her personal belongings and a small bank account on the basis that: it was in her best interests to remain in the public facility; that her wishes with respect to the family

13 (b) Is the Election Revocable? There is nothing in the FLA to indicate that an election once filed with the office of the Estate Registrar for Ontario is capable of being revoked. However, it would appear that the Estate Registrar for Ontario has at times accepted such revocations and has even permitted amendments to elections. 34 However see also Re Bolfan 35, where the court held that an election once made could not be revoked. Some care must be taken in considering whether to elect in circumstances where no Certificate of Appointment of Estate Trustee with a Will has been issued. Consideration should be given to deferring the filing of the election until after the Certificate of Appointment is issued. Where there is litigation over the validity of a will or difficulty in locating a will, it may be appropriate to apply for an extension of time for filing the election beyond the six-month period. 36 Of particular concern is in the situation where a prior will provides for greater benefits than the will which is signed later and which appears to be the last will of the deceased. In the case of Re van der Wyngaard, 37 the solicitor for the surviving husband, faced with this fact situation, tried to cover all the bases by having the election to take the equalization payment filed with the court but also filing a caveat challenging the later will on the grounds that the deceased lacked testamentary capacity. The court permitted the caveat but indicated that the better approach would be to file for an extension of time until the question of the validity of the will was determined. One writer 38 has suggested that where the surviving spouse wishes to take the rights under the will or on intestacy, the right approach might be to file no election. In that case the FLA deems the spouse to have elected to take under the will or on intestacy. 39 Presumably the court would have the jurisdiction to reverse the deemed election at a later date if a later will surfaces or if the later will is declared invalid and an earlier will is reinstated with the effect that the surviving spouse would have had greater rights under the FLA and might have made a different decision. (c) Effect of an Election farm were protected by the provisions in her husband s will; and that he had left her sufficient funds to take care of her needs. The estate of the husband had a value of $1.5 million and his will left the bulk of the estate to the son and a $100,000 fund for the wife. 34 See Money & Family Law Vol 3 No. 8 and Vol 3 at and R Harrison Smith v Harrison (May 24, 1989) Ont HC. 35 (1992) 87 DLR (4th) ETR 23 (Ont Ct (Gen Div). 36 See Barry S. Corbin, The Impact of the Family Law Act on Estate Administration (LSUC Bar Admission Course Materials, 2005). 37 (1987) 59 OR (2d) RFL (3d) 81 (Sur Ct). 38 See Corbin, supra note FLA at s. 6(11).

14 If the surviving spouse elects to take under the FLA, unless the will provides that the benefits under the will are in addition to the benefits under section 5(2) of the FLA, the gifts made under the deceased spouse s will are revoked and the will is to be read as if the surviving spouse had predeceased the testator. In addition, the spouse shall be deemed to have disclaimed an entitlement under Part II of the SLRA (the rights under the intestacy rules). 40 (d) Elections and Executorship For many years there was uncertainty as to whether a surviving spouse, named as an executor under the Will of a deceased spouse, automatically forfeited the position of executor by filing an election. However, the decision of Reid Martin v. Reid 41 confirmed that subsection 6(8) of the FLA, which provides that when a surviving spouse files an election, the will of the deceased spouse is to be interpreted as if the surviving spouse was predeceased, should be given its plain meaning and that therefore a surviving spouse who elects for equalization cannot act as executor. It is possible to draft a will in order to allow a surviving spouse to both elect for equalization and continue to serve as executor, but as one author has commented, in order to get around the application of subsection 6(8) of the FLA, rather complex Will drafting is required. For example, the will of the deceased spouse must provide for bequests to the surviving spouse conditional upon his or her election, while also providing that such bequests are in addition to any equalization entitlement they may receive. 42 Estate administration issues can also arise when a surviving spouse who is also a named executor of the estate files an election for equalization. For example, what is the proper procedure for removing a surviving spouse who has applied for a Certificate of Appointment prior to electing for equalization? Is the procedure analogous to that when a trustee dies in office or is an application to remove the surviving spouse required? This is not necessarily a theoretical issue in some cases, as it may be necessary for a Certificate of Appointment to be acquired before the surviving spouse has an opportunity to determine whether to elect for equalization. For example, the deceased spouse may have passed away immediately prior to the closing of real estate transaction, and in order for the deal to be finalized; a Certificate of Appointment has to be acquired. This may take place before the surviving spouse has had an opportunity to even consider whether or not he or she wishes to elect for equalization under the FLA. (e) Elections and Intestacy As noted earlier, the effect of an election in favour of equalization by a surviving spouse in a situation of intestacy, whether partial or total, is that the surviving spouse forfeits his or her rights to entitlement under Part II of the SLRA. If there is a partial intestacy, even if the will 40 FLA at s. 6(8). 41 (1999) 25 E.T.R. (2d) 267, 11 R.F.L. (5 th ) 374 (Ont. Div. Ct.). 42 See Corbin, supra note 34.

15 provides that its benefits are to be in addition to equalization this forfeiture of SLRA entitlement will still occur. In a situation of intestacy, the SLRA does not necessarily apply to the surviving spouse s right to property outside of Ontario. Therefore, dependent on the laws of the jurisdiction in which the assets are situated, it is possible that a surviving spouse who files an election in a situation of intestacy may still be able to access certain assets of the deceased spouse located outside of Ontario. (f) Effect of an Election on a Dependants Relief Claims The surviving spouse s right to dependent relief under Part V of the SLRA is not affected by his or her decision to elect in favour of equalization. It is important to note the possible interaction of the SLRA and the FLA, since as noted above, a condition of a dependant s right to support under the SLRA is that the deceased spouse did not make adequate provision for him or her. In the event a surviving spouse determines to elect to take his or her entitlement under the FLA and in so doing makes a serious error (i.e. his or her equalization entitlement was far less than what the deceased spouse had provided in the Will), is it possible for such a surviving spouse to still claim that the deceased did not make provision for adequate support for the purposes of a dependant s relief application? Subsection 58(4) of the SLRA provides that adequate support is to be determined on the date of the hearing of the application, thereby suggesting that the fact that the surviving spouse forfeited his or her entitlement is not relevant but the consequences of the election in regard to his or her need is relevant. (g) The Priority of an Equalization Claim Pursuant to subsection 6(12), a surviving spouse s entitlement to an equalization claim has priority over the following: (i) (ii) (iii) the gifts made in the deceased spouse s will, if any, subject to subsection (13); a person s right to a share of the estate under Part II of the SLRA; an order made against the estate under Part V of the SLRA, except an order in favour of a child of the deceased spouse. However, according to subsection 6(13) of the FLA, the surviving spouse s entitlement does not have priority over a gift by will made in accordance with a contract that the deceased spouse entered into in good faith and for valuable consideration, except to the extent that the value of the gift, in the court s opinion, exceeds the consideration. In addition, it should be noted that the spouse s equalization claim does not necessarily stand behind all of the claims of creditors of the deceased. Although the spouse s claim presumably ranks below those of secured creditors and creditors preferred by law, it is debateable where it stands in relation to unsecured creditors See Corbin, supra note 34.

16 (h) Effect of Equalization on the Distribution of the Estate Subsection 6(14) of the FLA provides that no distribution shall be made in the administration of a deceased spouse s estate within six months of the spouse s death, unless: (i) (ii) the surviving spouse gives written consent to the distribution; or the court authorizes the distribution. In the event that a personal representative of the deceased receives notice that an application for equalization has been made pursuant to Part I of the FLA, no distributions can be made out of the estate unless: (i) (ii) the applicant gives written consent to the distribution; or the court authorizes the distribution. If the court extends the time for a spouse s application for equalization under subsection 5 (2) of the FLA, any property of the deceased spouse that is distributed before the date of the order and without notice of the application shall not be brought into the calculation of the deceased spouse s net family property. It should be noted that the foregoing restrictions on distribution do not, pursuant to subsection 6(17) of the FLA, prohibit reasonable advances to dependants of the deceased spouse for their support. Pursuant to subsection 6(19) of the FLA, if the personal representative makes a distribution that contravenes these restrictions against distributions, the court will make an order against the estate. If the undistributed portion of the estate is not sufficient to satisfy the order, the personal representative is personally liable to the applicant for the amount that was distributed or the amount that is required to satisfy the order, whichever is less. In addition, on motion by the surviving spouse, the court may make an order suspending the administration of the deceased spouse s estate for the time and to the extent that the court decides. C. CONCLUSION The foregoing discussion represents only a brief overview of the complexities of the SLRA and FLA and their impact on the administration of estates. Numerous family and estate law issues can arise upon the death of a family member, and forethought should be paid to these issues during the planning process so that they do not develop into unnecessary problems at a later date.

17 SCHEDULE A 62. (1) Determination of amount - In determining the amount and duration, if any, support, the court shall consider all the circumstances of the application, including, (a) the dependant s current assets and means; (b) the assets and means that the dependant is likely to have in the future; (c) the dependant s capacity to contribute to his or her own support; (d) the dependant s age and physical and mental health; (e) the dependant s needs, in determining which the court shall have regard to the dependant s accustomed standard of living; (f) the measures available for the dependant to become able to provide for his or her own support and the length of time and cost involved to enable the dependant to take those measures; (g) the proximity and duration of the dependant s relationship with the deceased; (h) the contributions made by the dependant to the deceased s welfare, including indirect and non-financial contributions; (i) the contributions made by the dependant to the acquisition, maintenance and improvement of the deceased s property or business; (j) a contribution by the dependant to the realization of the deceased s career potential; (k) whether the dependant has a legal obligation to provide support for another person; (l) the circumstances of the deceased at the time of death; (m) any agreement between the deceased and the dependant; (n) any previous distribution or division of property made by the deceased in favour of the dependant by gift or agreement or under court order; (o) the claims that any other person may have as a dependant; (p) if the dependant is a child, (i) the child s aptitude for and reasonable prospects of obtaining an education, and

18 (ii) the child s need for a stable environment; (q) if the dependant is a child of the age of sixteen years or more, whether the child has withdrawn from parental control; (r) if the dependant is a spouse, (i) a course of conduct by the spouse during the deceased s lifetime that is so unconscionable as to constitute an obvious and gross repudiation of the relationship, (ii) the length of time the spouses cohabitated, (iii) the effect on the spouse s earning capacity of the responsibilities assumed during cohabitation, (iv) whether the spouse has undertaken the care of a child who is of the age of eighteen years or over and unable by reason of illness, disability or other cause to withdraw from the charge of his or her parents, (v) whether the spouse has undertaken to assist in the continuation of a program of education for a child eighteen years of age or over who is unable for that reason to withdraw from the charge of his or her parents, (vi) any housekeeping, child care or other domestic service performed by the spouse for the family, as if the spouse had devoted the time spent in performing that service in remunerative employment and had contributed the earnings to the family s support, (vi.1) [Repealed 2005, c. 5, s. 66(10).] (vii) the effect on the spouse s earnings and career development of the responsibility of caring for a child. (viii) the desirability of the spouse remaining at home to care for a child; and (s) any other legal right of the dependant to support, other than out of public money. 62(2) Evidence - In addition to the evidence presented by the parties, the court may direct other evidence to be given as the court considers necessary or proper. 62(3) Idem - the court may accept such evidence as it considers proper of the deceased s reasons, so far as ascertainable, for making the dispositions in his or her will, or for not making adequate provision for a dependant, as the case may be, including any statement in writing signed by the deceased.

19 (4) Idem - In estimating the weight to be given to a statement referred to in subsection (3), the court shall have regard to all the circumstances from which an inference can reasonably be drawn as to the accuracy of the statement.